To benefit from current favourable interest rates in my region (France: ca. 1.5%pa fixed over 20 years), I am considering investing in a buy-to-let property.
I consider that interest rates are likely to increase in the future, and inflation to be positive too. I thus want to push my mortgage ability as far as I can (reasonably).
However, I am still a bit new/naive with real-estate investment. My initial thought is that rent perceived from the house should exceeds the mortgage payment and taxes/maintenance costs (+ ideally some extra buffer), so that the house pays for itself.
(E.g. rent is 2000, when mortgage is 1500 and taxes 200.)
However, I have also been told (by someone that has no financial involvement whatsoever) that this investment could still be interesting, even if rent do not exceed mortgage payment.
(E.g. rent is 2000, when mortgage is 2200 and taxes 300.)
I could definitively afford the extra money required (in the example: 500 per month).
But "paying for people to live in my house" hardly makes sense to me. I am thus wondering:
Is it a good idea to invest in buy-to-let if rent does not cover mortgage payment?
A variant of this question is with the following scenario: the bank asks for 30% down-payment.
(Consider a 1,000 house; I would thus need 300 cash.)
However, the bank accepts that I don't actually spend all this money to buy the house, but rather invest some of it with the bank and thus borrow more money.
(E.g. I spend 100 in the house, but put the other 200 in a savings/investment portfolio at the bank — so I end up actually borrowing 900 at the bank [hence the high mortgage payment])
Would it then make more sense in this situation?
(My thought is to compare the extra-cost caused by borrowing 200 more, and to check whether the 200 invested would generate more money)